MCF gets lifeline for another 100 days, resumes production

SPIC and Madras Fertilisers are the other fertiliser firms that have resumed production

Vijay Mallya-led UB Group firm Mangalore Chemicals and Fertilisers Ltd, a takeover target of two fertiliser companies, has resumed production after the government notified extension of subsidy for 100 days on production of urea using naphtha as feedstock.

Besides MCFL, other two fertiliser firms - SPIC and Madras Fertilisers Ltd - have also resumed production, following the government's decision for continuing the payment of subsidy for urea using naphtha as feedstock, Fertiliser Minister Ananth Kumar said on Wednesday.

The three companies had halted production of urea in October last year after subsidy payments were stopped.

In a regulatory filing, SPIC said the ministry has informed the company would be allowed to produce urea using feed stock naphtha for a period of 100 days from January 7, 2015, the date of notification.

"The company has therefore commenced start-up activities from today (Wednesday)," it said, adding that it would inform the exchange immediately on commencement of production. The production of urea in the company has been affected due to the central governments' policy on usage of feed stock naphtha as fuel.

The government had stopped the extension of subsidy to naptha-based urea plants as cost of production of urea was as high as Rs 43,000 per tonne as compared to Rs 18,000 per tonne using gas as feedstock.

Urea is a controlled commodity and its selling price is fixed at Rs 5,360 per tonne. The difference between cost of production and retail price is paid as subsidy to manufacturers.

Pune-based Deepak Fertilisers has been competing with Kolkata-based industrialist Saroj Poddar-led Zuari Group for taking control of Mangalore Chemicals and Fertilisers Ltd (MCFL) since July 2013.

In the end of December, 2014, the Tamil Nadu government has said that it is willing to forego the VAT component on naphtha, a move that may affect the exchequer by around Rs 90 crore while ensuring the job of hundreds of workers at the fertiliser plants in the state. The move was aimed to improve urea supply due to resumption of operations of the two urea plants in the state.

The Centre has decided to discontinue subsidy for naphtha-based urea fertilizer plants since October 2014 till such time gas connectivity is provided to these two plants by the government of India.

Tamil Nadu has two major fertilizer plants owned by SPIC at Tuticorin and Madras Fertilizers Ltd, Manali, near Chennai.